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More hospital outlier settlements expected

July 10, 2006

Modern Healthcare reports that the recent settlements by Tenet Healthcare and St. Barnabas Health Care System may be only the start of a flurry of hospital settlements.

Tenet and St. Barnabas settled False Claims Act suits that alleged they used the Medicare outlier payment system, designed to compensate hospitals for caring for the sickest patients, to fraudulently increase their revenue.

While it is not known how many hospitals are under investigation for abusing the outlier system, former CMS Administrator Tom Scully guessed between 700 and 800 in a December 2005 court affidavit. A CMS report estimated 450 hospitals.

The July 10, 2006 article says that healthcare consulting firms may also be targeted in the probe. CBIZ KA Consulting Services and Besler Consulting have been implicated in the Justice Department investigation and were named in whistle-blower lawsuits, which remain under seal. Sources say that the two firms and several other consulting groups allegedly approached hospitals to demonstrate how to exploit loopholes in the outlier statute that would increase reimbursements without treating greater numbers of sicker patients.

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